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REPORT 


THE  MONETARY  COMMISSION 


TO 


THE  EXECUTIVE  COMMITTEE 


THE  INDIANAPOLIS  MONETARY  CONVENTION 


1897. 


THE 


MONETARY  COMMISSION 


INDIANAPOLIS   CONVENTION. 


GEOKGE  F.  EDMUNDS,  Vermont, 

Chairman. 

GEOKGE  E.  LEIGHTON,  Missouei, 

Vice- Chairman. 

T.  G.  BUSH,  Alabama. 

W.  B.  DEAN,  Minnesota. 

CHARLES  S.  FAIRCHILD,  New  York. 

STUYVESANT  FISH,  New  York. 

J.  W.  FRIES,  North  Carolina. 

LOUIS  A.  GARNETT,  California. 

J.  LAURENCE  LAUGHLIN,  Illinois. 

C.  STUART  PATTERSON,  Pennsylvania. 

ROBERT  S.  TAYLOR,  Indiana. 


To  THE  Executive  Committee  of  the 

Indianapolis  Monetary  Convention. 

The  Commission  appointed  by  you  under  the  resolutions 
adopted  by  the  Indianapolis  Monetary  Convention  on  15th  Jan- 
uary, 1897,  with  a  request  "to  make  a  thorough  investigation 
of  the  monetary  affairs  and  needs  of  the  country  in  all  relations 
and  aspects,  and  to  make  proper  suggestions  as  to  the  evils  found 
to  exist  and  the  remedies  therefor,"  respectfully  rej^orts  that  the 
members  thereof  met  at  Washington  on  the  22d  day  of  Septem- 
ber, 1897,  and  organized  by  the  election  of  George  F.  Edmunds, 
as  Chairman,  and  George  E.  Leighton,  as  Vice-Chairman. 

The  resolutions  adopted  by  the  Indianapolis  Monetary  Con- 
vention declare  "  that  it  has  become  absolutely  necessary  that  a 
consistent,  straightforward  and  deliberately-planned  monetary 
system  shall  be  inaugurated,  the  fundamental  basis  of  which 
should  be :  first,  that  the  present  gold  standard  should  be 
maintained ;  second,  that  steps  should  be  taken  to  insure  the 
ultimate  retirement  of  all  classes  of  United  States  notes  by  a 
gradual  and  steady  process,  and  so  as  to  avoid  injurious  contrac- 
tion of  the  currency  or  disturbance  of  the  business  interests  of 
the  country,  and  that  until  such  retirements  provision  should  be 
made  for  a  separation  of  the  revenue  and  note-issue  departments 
of  the  Treasury ;  third,  that  a  banking  system  be  provided  which 
should  furnish  credit  facilities  to  every  portion  of  the  country 
and  a  safe  and  elastic  circulation,  and  especially  with  a  view  of 
securing  such  a  distribution  of  the  loanable  capital  of  the  coun- 
try as  will  tend  to  equalize  the  rates  of  interest  in  all  parts 
thereof." 
.  We  have  accepted  those  principles  as  the  basis  of  our  action, 
not  only  because  they  are  the  instructions  of  the  body  of  citizens 
by  whom  we  have  been  appointed,  but  also  because  they  meet 
the  approval  of  our  judgment. 

403176 


We  have  also  sought  and  received  the  counsel  of  many  of  our 
fellow  citizens  in  all  parts  of  the  country.  Their  communi- 
cations, while  differing  in  some  respects,  have,  upon  the  more 
important  points,  presented  a  concurrence  of  opinion  which  has 
been  an  invaluable  aid  in  the  formation  of  our  conclusions. 

We  submit,  for  the  reasons  hereinafter  stated,  a  plan  of 
currency  reform,  in  the  hope  that  it  will,  if  enacted  into  law, 
accom])lish,  so  far  as  possible,  these  results : 

1.  To  remove,  at  once  and  forever,  all  doubt  as  to  what  the 
standard  of  value  in  the  United  States  is,  and  is  to  be. 

2.  To  establish  the  credit  of  the  United  States  at  the  highest 
point  among  the  nations  of  the  world. 

3.  To  eliminate  from  our  currency  system  those  features  which 
reason  and  experience  show  to  be  elements  of  weakness  and 
danger. 

4.  To  provide  a  paper  currency  convertible  into  gold  and  equal 
to  it  in  value  at  all  times  and  places,  in  which,  with  a  volume 
adequate  to  the  general  and  usual  needs  of  business,  there  shall 
be  combined  a  quality  of  growth  and  elasticity,  through  which  it 
will  adjust  itself  automatically  and  promptly  to  all  variations  of 
demand,  whether  sudden  or  gradual ;  and  which  shall  distribute 
itself  throughout  the  country  as  the  wants  of  different  sections 
may  require. 

5.  To  so  utilize  the  existing  silver  dollars  as  to  maintain 
their  parity  with  gold  without  imposing  undue  burdens  on  the 
Treasury. 

6.  To  avoid  any  injurious  contraction  of  the  currency. 

7.  To  avoid  the  issue  of  interest- bearing  bonds,  except  in  case 
of  unlooked-for  emergency;  but  to  confer  the  power  to  issue 
bonds  when  necessary  for  the  preservation  of  the  credit  of  the 
government. 

8.  To  accomplish  these  ends  by  a  plan  which  would  lead  from 
our  present  confused  and  uncertain  situation  by  gradual  and  pro- 
gressive steps,  without  shock  or  violent  change,  to  a  monetary 
system  which  will  be  thoroughly  safe  and  good,  and  capable  of 
growth  to  any  extent  that  the  country  may  require. 

We  cannot,  within  the  limits  of  this  preliminary  report,  go  at 


length  into  the  reasons  which  have  led  us  to  all  the  conclusions 
here  expressed.  A  statement  of  those  which  relate  to  the  more 
important  points  must  suffice.  Later  a  fuller  and  final  report 
will  be  presented. 

THE  FACTS  AS  TO  THE  CURRENCY. 

The  people  of  the  United  States  have  ten  different  forms  of 
currency:  gold  coins,  silver  dollars,  subsidiary  silver  coins,  minor 
coins,  gold  certificates,  silver  certificates,  United  States  notes, 
currency  certificates,  Treasury  notes  of  1890,  and  national  bank 
notes.  The  respective  qualities  of  each,  the  amounts  outstand- 
ing, the  amounts  in  the  Treasury,  the  amounts  in  circulation,  and 
the  respective  denominations  of  the  paper  currency,  were  on 
1st  November,  1897, as  follows: 

1.  Gold  Coins  of  the  denominations  of  $20,  $10,  $5,  and 
$2.50,  weighing  25.8  grains  to  the  dollar  and  .900  fine.  They 
are  a  "  legal  tender  in  all  payments  at  their  nominal  value  when 
not  below  the  standard  weight  and  limit  of  tolerance  provided 
by  law  for  the  single  piece,  and,  when  reduced  in  weight  below 
such  standard  and  tolerance,  a  legal  tender  at  valuation  in  pro- 
portion to  their  actual  weight";  receivable  for  all  public  dues, 
and  exchangeable  for  gold  certificates.  Gold  bullion  is  admitted 
to  free  coinage.  The  Treasury  estimates  that  the  stock  of  gold 
in  the  country  is  $729,661,110,  of  which  $153,573,148  in  addi- 
tion to  $36,814,109  held  against  outstanding  gold  certificates  are 
held  by  the  Treasury,  and  $195,895,107  are  held  by  the  national 
banks. 

2.  Standaed  Silver  Dollars,  each  containing  412.5  grains 
of  standard  silver  .900  fine,  coined  for  government  account,  a 
"  legal  tender  at  their  nominal  value  for  all  debts  and  dues, 
public  and  private,  except  where  otherwise  expressly  stipulated 
in  the  contract  "  ;  receivable  for  all  governmental  dues,  and  ex- 
changeable for  silver  certificates. 

From  1793  to  1873,  the  Mint  coined  silver  dollars  to  the 
amount  of  $8,031,238.  From  1874  to  1878,  none  were  .coined. 
The  act  of  28th  February,  1878,  required  not  less  than  two 


millions  nor  more  than'four  millions  dollars  worth  of  bullion  to 
be  purchased  monthly  and  coined  into  standard  silver  dollars. 

The  act  of  7th  August,  1882,  directs  the  Secretary  of  the  Treas- 
ury "  to  transport,  free  of  charge,  silver  coins  when  requested  to 
do  so,  provided  that  an  equal  amount  in  coin  or  currency  shall 
have  been  deposited  in  the  Treasury  by  the  applicant." 

The  act  passed  on  19th  February,  1887,  which  became  a 
law,  without  Presideht  Hayes'  approval,  on  3d  March,  1887, 
directed  that  "trade  dollars"  received  at  the  Treasury  should  be 
coined  into  standard  dollars.  The  act  of  14th  July,  1890,  re- 
quired four  million  five  hundred  thousand  ounces  of  fine  silver 
bullion  to  be  purchased  monthly  and  Treasury  notes  to  be  issued 
in  payment  therefor.  The  act  of  1st  November,  1893,  repealed 
the  purchasing  clause  of  the  act  of  14th  July,  1890. 

Under  the  act  of  28th  February,  1878,  the  government 
purchased  291,272,018  ounces  of  silver  at  a  cost  of  $308,279,260. 
Under  the  act  of  14th  July,  1890,  the  government  purchased 
168,674,682  ounces  at  an  average  price  per  fine  ounce  of  $0.9244, 
costing  $155,931,002.  The  government  coined  to  the  1st  of 
November,  1897,  $452,713,792,  of  which  $392,715,014  are  in 
the  Treasury,  and  $60,196,778  are  in  circulation.  The  free 
transportation  of  the  silver  dollar  has  cost  $1,064,106.  The 
government  now  holds  115,361,079.54  ounces  of  silver  bullion, 
which  cost  $104,853,851.55,  and  which,  at  the  price  of  silver  on 
3d  November,  1897,  are  worth  $65,900,016.67.  As  against  the 
392,517,014  silver  dollars  now  in  the  Treasury  there  are 
outstanding  silver  certificates  to  the  amount  of  $372,838,919, 
leaving  $19,678,095  in  the  Treasury  uncovered  by  certificates. 

As  the  silver  bullion  now  in  the  Treasury  and  purchased 
under  the  act  of  1890  cost  $103,957,026.25,  and  there  are  out- 
standing Treasury  notes  of  1890  to  the  amount  of  $109,313,280, 
silver  dollars  to  the  amount  of  $5,356,254  must  be  held  as 
against  these  Treasury  notes  of  1890,  and  this  amount  deducted 
from  the  amount  of  silver  dollars  uncovered  by  silver  certifi- 
cates [$19,678,095]  leaves  as  the  amount  of  silver  dollars  un- 
covenid  by  either  silver  certificates  or  Treasury  notes  of  1890, 
and  subject  to  disposal    by    the   Treasury,  $14,321,841.     The 


act  of  14th  July,  1890,  declared  it  to  be  "the  established  policy 
of  the  United  States  to  maintain  the  two  metals  on  a  parity  with 
each  other  upon  the  present  legal  ratio,  or  such  ratio  as  may  be 
provided  by  law."  The  act  of  1st  November,  1893,  declared 
it  "to  be  the  policy  of  the  United  States  to  continue  the  use  of 
both  gold  and  silver  as  standard  money  and  to  coin  both  gold 
and  silver  into  money  of  equal  intrinsic  and  exchangeable  value, 
such  equality  to  be  secured  through  international  agreement,  or 
by  such  safeguards  of  legislation  as  will  insure  the  maintenance 
of  the  parity  in  value  of  the  coins  of  the  two  metals,  and  the 
equal  power  of  every  dollar  at  all  times  in  the  markets  and  in  the 
payment  of  debts." 

3.  Subsidiary  Silver,  coined  for  government  account  in 
denominations  of  50,  25,  and  10  cents,  .900  fine,  containing 
385.8  grains  to  the  dollar ;  "  a  legal  tender  in  all  sums  not  exceeding 
$10  in  full  payment  of  all  dues,  public  and  private" ;  receivable 
for  governmental  dues  to  $10;  and  exchangeable  for  lawful 
money  at  the  office  of  the  Treasurer  or  any  Assistant  Treasurer 
of  the  United  States  in  sums  of  $20  or  any  multiple  thereof.  The 
general  stock  of  subsidiary  silver  amounts  to  $75,414,007,  of 
which  $11,981,078  are  in  the  Treasury,  and  $63,432,929  are  in 
circulation. 

4.  Minor  Coins,  coined  on  government  account  in  denom- 
inations of  5  cents  and  1  cent ;  a  "  legal  tender  at  their  nominal 
value  for  any  amount  not  exceeding  25  cents  in  any  one  pay- 
ment " ;  receivable  to  the  amount  of  25  cents  for  all  govern- 
mental dues  ;  and  redeemable  in  lawful  money  at  the  office  of  the 
Treasurer  and  the  several  Assistant  Treasurers  and  depositories 
of  the  United  States  when  presented  in  sums  of  not  less  than  $20. 

5.  Gold  Certificates,  issued  under  the  acts  of  March  3, 
1863,  and  June  12,  1882,  for  gold  coin  deposited  in  the  Treas- 
ury, in  denominations  of  $10,000,  $5,000,  $1,000,  $500,  $100, 
$50,  and  $20 ;  not  a  legal  tender ;  "  receivable  for  customs,  taxes 
and  all  public  dues,"  and  redeemable  in  gold  at  the  Treasury  or 
any  sub-treasury. 

Certificates  to  the  amount  of  $38,348,169  are  outstanding,  of 


which  $1,534,060  are  in  the  Treasury,  and  $36,814,109  are   iu 
circulation. 

6.  Silver  Certificates,  issued  against  standard  silver  dollars 
deposited,  in  denominations  of  $1,000,  $500,  $100,  $50,  $20,  $5, 
$2  and  $1 ;  not  a  legal  tender;  receivable  for  customs,  taxes,  and  all 
public  dues;  exchangeable  for  standard  silver  dollars  or  smaller 
coin ;  and  redeemable  in  standard  silver  dollars.  There  are  out- 
standing silver  certificates  to  the  amount  of  $384,170,504,  of 
which  $11,331,585  are  iu  the  Treasury  and  $372,838,919  are  in 
circulation. 

7.  Treasury  Notes,  issued  under  the  act  of  July  14, 1890, 
in  payment  for  silver  bullion ;  a  ''  legal  tender  for  all  debts  pub- 
lic and  private,  except  where  otherwise  expressly  stipulated  in 
the  contract" ;  receivable  for  customs,  taxes,  and  all  public  dues 
and  "redeemable  on  demand  in  coin"  at  the  office  of  the  Treasurer 
or  any  Assistant  Treasurer  of  the  United  States.  There  have 
been  issued  $155,931,002,  of  which  $46,617,722  have  been  re- 
deemed in  silver  and  cancelled ;  $7,553,325  are  in  the  Treasury, 
and  $101,759,955  are  in  circulation. 

8.  United  States  Notes,  issued  under  the  acts  of  Febru- 
ary 25,  1862,  July  2,  1862,  and  March  3,  1863,  in  denomina- 
tions of  $1,  $2,  $5,  $10,  $20,  $50,  $100,  $500,  $1,000,  $5,000,  and 
$10,000;  a  "legal  tender  in  payment  of  all  debts,  public  and 
private,  within  the  United  States,  except  for  duties  on  imports 
and  interest  on  the  public  debt ";  redeemed  when  presented  since 
1st  January,  1879,  in  gold  coin  at  the  sub-treasuries  in  New 
York  and  San  Francisco,  and  reissued.  The  highest  amount 
of  these  notes  outstanding  at  any  time  was  on  January  3,  1864, 
when  it  reached  $449,338,902.  By  the  Public  Credit  act  of 
March  18,  1869,  "The  United  States  solemnly  pledges  its  faith 
to  make  provision  at  the  earliest  practicable  period  for  the  re- 
demption of  the  United  States  notes  in  coin."  The  resumption 
act  of  January  14,  1875,  authorized  the  use  of  surplus  revenues 
and  the  issue  of  bonds  for  their  redemption.  The  act  of  May 
31,  1878,  prohibited  their  further  cancellation  or  retirement,  and 
directed  the  reissue  of  such  as  might  be  received  or  redeemed 
by  the  Treasury.     The  amount  outstanding  has  therefore  since 


9 

remained  at  $346,681,016,  of  which  $87,684,018  are  in  the 
Treasury,  $48,625,000  are  held  against  outstanding  currency 
certificates,  and  $258,996,998  are  in  circulation. 

The  aggregate  amount  outstanding  of  United  States  notes, 
Treasury  notes  of  1890,  and  silver  dollars  is  $908,708,088,  of 
which  $61,274,184  are  now  in  the  Treasury,  but  liable  to  re- 
issue, and  $847,433,904  are  in  circulation. 

As  against  this  large  amount  of  that  which  is  a  credit  cur- 
rency, aside  from  the  value  of  the  silver  bullion  and  dollars  in 
the  Treasury,  the  Treasury  now  holds  $153,573,147  in  gold  coin 
and  bullion,  after  deducting  the  amount  of  the  gold  certificates. 

9.  Currency  Certificates,  issued  under  the  act  of  June  8, 
1872,  in  denominations  of  $10,000,  upon  deposit  of  United 
States  notes,  payable  to  order,  and  not  a  legal  tender,  nor  re- 
ceivable in  exchange  for  anything  other  than  legal-tender  notes. 
$48,625,000  are  outstanding,  of  which  $340,000  are  in  the  Treas- 
ury, and  $48,285,000  are  in  circulation. 

10.  National  Bank  Notes,  issued  by  the  national  banks  of 
the  United  States  in  accordance  with  the  act  of  June  3,  1864,  to 
the  extent  of  90  per  cent,  of  the  par  of  government  bonds  de- 
jjosited  by  such  banks  with  the  Treasury ;  not  a  legal  tender ; 
receivable  at  par  "  in  all  parts  of  the  United  States  in  payment 
of  taxes,  excises,  public  lands  and  all  other  dues  to  the  United 
States  except  duties  on  imports ;  and  also  for  all  salaries  and 
other  debts  and  demands  owing  by  the  United  States  to  in- 
dividuals, corporations  within  the  United  States,  except  interest 
on  the  public  debt  and  in  redemption  of  the  national  currency"; 
receivable  also  by  every  national  banking  association  for  any  debt 
or  liability  to  it,  and  redeemable  at  the  Treasury. 

The  national  bank  notes  outstanding  are  $230,132,275,  of 
which  $4,998,012  are  in  the  Treasury,  and  $225,134,263  are  in 
circulation. 

The  national  banks  were  organized  under  the  act  of  25th  Feb- 
ruary, 1863,  and  its  supplements.  They  were  authorized  to 
issue  a  circulation  based  upon  bonds,  in  order  that  there  might 
thereby  be  created  a  demand  for  the  bonds  of  the  United  States. 

On  2nd  July,  1866,  there  were  1634  banks;  on  26th  Decem- 
2 


10 

ber,  1873,  1976;  on  2nd  October,  1890,  3540;  on  9th  Decem- 
ber, 1892,  3773,  and  on  5th  October,  1897,  3610.  The  maxi- 
mum capital  was  $689,698,017  on  9th  December,  1892.  The 
maximum  circulation  was  on  26th  December,  1873,  $341,320,256, 
and  the  minimum  circulation  on  2nd  October,  1890,  $122,928,- 
084.  Up  to  1892,  the  tendency  was  towards  increase  of  capital. 
Since  then  the  tendency  has  been  in  the  direction  of  a  decreasing 
capitalization.  From  1873  to  1890,  there  was  a  marked  decrease 
in  circulation,  with  occasional  fluctuations ;  but  since  1890  there 
has  been  some  increase  of  circulation,  with  no  prospect  of  any 
material  increase  under  the  existing  system. 

On  5th  October,  1897,  there  were  3610  banks,  with  an  out- 
standing note  issue  of  $230,132,275  [of  which  $4,998,012  were 
held  in  the  Treasury],  with  a  capital  stock  of  $631,488,095, 
with  an  aggregate  capital,  surplus  and  undivided  profits  of 
$966,240,095,  with  deposits  of  $1,869,491,310,  and  with  invest- 
ments in  discounted  paper  [rediscounts  deducted]  of  $2,043,803,- 
392,  in  United  States  bonds  of  $277,235,920,  in  other  stocks  and 
securities  of  $208,831,563,  and  in  lawful  money  of  $388,882,631, 
of  which  $195,895,107  are  in  gold  coin.  The  five  per  cent,  re- 
demption fund  held  by  the  Treasury  now  amounts  to  $10,021,- 
689.  From  the  organization  of  the  system,  in  1863,  to  30th 
June,  1897,  the  national  banks  have  paid  in  taxes  to  the  United 
States  $150,207,339.44;  and  the  United  States  has  also  made  a 
profit  of  $2,826,466  from  that  amount  paid  by  the  banks  to 
redeem  circulation  which  has  not  been  presented. 


THE  DEFECTS  OF  THE  SYSTEM. 

The  defects  of  the  existing  system  are  : 

First.  The  va.st  amount  of  government  credit  currency  with- 
out a  certain  and  adequate  provision  for  its  redemption,  and  the 
consequent  diminution  of  public  confidence  in  the  continued 
maintenance  of  the  gold  standard. 

Second.  The  continuance  in  circulation  of  government  prom- 
ises to  pay,  which,  when  made  a  legal  tender,  constitute  a  forced 


11 

loan,  which  are  secured  only  by  such  resources  as  the  exercise  of 
the  taxing  power  can  render  available,  and  which  are  payable 
only  at  the  will  of  the  debtor. 

Third.  The  failure  to  provide  the  means  for  a  gradual  and 
sufficient  increase  of  the  volume  of  the  currency  to  meet  the 
needs  of  an  increasing  population  and  an  enlarging  commerce. 

Fourth.  The  want  of  a  natural  outflow  and  inflow  of  the  cur- 
rency when  and  as,  and  only  when  and  as,  the  agricultural,  man- 
ufacturing and  commercial  interests  of  the  country  require,  at  a 
given  time,  either  a  greater  or  a  less  quantity  of  currency  in  cir- 
culation. 

Fifth.  The  failure  to  secure  such  a  distribution  of  the  loan- 
able capital  of  the  country  as  will  tend  to  equalize  the  rates 
of  interest  in  all  its  parts. 

Sixth.  The  confusion  of  the  fiscal  functions  of  the  Treasury  as 
the  receiver  of  the  public  revenue  and  the  disburser  thereof 
under  congressional  appropriations  with  its  issue  and  redemption 
functions  in  exchanging  and  redeeming  the  currency. 

Seventh.  The  circulation  of  different  forms  of  government 
currency  having  different  qualities  as  to  legal  tender  and  receiv- 
ability  for  government  dues. 

Eighth.  The  circulation  of  silver  dollars  of  full  legal-tender 
quality  whose  nominal  value  as  coins  so  largely  exceeds  their 
value  as  bullion,  that  they  oflPer  tempting  inducements  to  success- 
ful counterfeiting. 

Ninth.  The  circulation  of  a  national  bank  currency  based  up- 
on government  bonds,  presupposing  a  continuing  issue  of  those 
bonds,  diminishing  the  loanable  funds  of  the  banks,  and,  by 
reason  of  their  bond  basis,  incapable  of  increasing  in  volume 
with  a  temporary  demand  for  more  currency,  and  of  decreasing 
with  the  cessation  of  that  demand. 

THE   STANDARD. 

The  most  serious  evil  affecting  our  present  monetary  system 
is  the  threatened  degradation  of  its  standard.  The  story  is 
familiar,  but  it  will  be  useful  to  recall  it  briefly  in  this  connec- 


12 

tion.  The  close  of  the  civil  war  found  the  people  of  the  United 
States  in  the  possession  of  a  depreciated  legal-tender  paper  cur- 
rency, with  its  inevitable  accompaniment  of  inflated  prices. 
To  return  from  such  a  condition  to  one  of  sound  money  and 
normal  prices  is  always  a  painful  process,  and  when  the  govern- 
ment began  that  process,  under  Secretary  McCulloch,  in  1866, 
there  was  an  outcry  against  it,  and  it  was  suspended.  From  a 
remonstrance  against  the  payment  of  the  demand  obligations  of 
the  Treasury  at  that  time  the  movement  grew  to  an  opposition 
to  the  payment  of  them  at  any  time,  and  finally  to  a  demand  for 
the  issue  of  more  of  them,  and  that,  not  in  the  form  of  promises 
to  pay,  but  of  fiat  paper  dollars.  The  number  of  persons  who 
•were  carried  away  by  these  delusions  was  very  great.  The 
political  struggle  which  ensued  was  prolonged  and  intense,  and 
the  victory  which  the  defenders  of  sound  money  achieved  in 
the  passage  of  the  resumption  law  of  1875  was  a  close  one. 

That  victory  ought  to  have  settled  all  disturbing  questions  in 
relation  to  the  monetary  policy  of  the  United  States,  and  would 
have  done  so,  so  far  as  can  now  be  seen,  if  it  had  not  been  for 
the  fall  in  the  value  of  silver,  which  began  while  the  contest  was 
going  on.  From  1792  to  1873  the  legal  standard  of  value  in 
the  United  States  was  the  double  one  of  gold  and  silver  at 
prescribed  ratios.  By  the  Coinage  act  of  1873  the  silver  dollar, 
which  was  then  worth  more  than  the  gold  dollar,  and  which  no 
one  could  foresee  would  ever  be  worth  less,  and  of  which  very 
few  were  in  existence,  was  dropped  from  the  coinage,  leaving 
gold  as  the  only  full  legal-tender  coined  money. 

Soon  after  the  passage  of  this  law,  the  value  of  silver  began 
to  decline.  The  friends  of  cheap  money  saw  their  opportunity 
and  lost  no  time  in  improving  it.  The  clamor  for  the  restoration 
of  the  sixteen-to-one  silver  dollar  to  free  coinage  began.  This 
was  a  far  more  plausible,  and  therefore  more  dangerous,  move- 
ment than  the  fiat  paper  money  scheme.  Silver  had  a  real  value. 
At  the  beginning  of  the  agitation  that  value  was  not  greatly 
less  than  sixteen  of  silver  to  one  of  gold  in  weight.  It  was 
claimed  that  its  admission  to  free  coinage  would  increase  its  value 
to  the  full  measure  of  that  ratio.     Patriotic  sentiment  was  in- 


u 

voked  in  its  favor.  It  was  said  to  be  the  money  of  the  fathers 
and  the  Constitution.  To  this  was  added  the  appeal  to  class 
prejudice.  Gold  was  said  to  be  the  money  of  the  rich ;  silver 
of  the  poor.  Gold  was  said  to  be  increasing  in  value,  and  so 
depressing  all  prices,  and  increasing  the  burden  of  all  debts  to 
the  unjust  advantage  of  all  creditors.  The  advocates  of  free 
silver  professed  to  be  the  champions  of  the  farmer,  the  mechanic 
and  the  laborer  against  the  aggressions  of  the  capitalist,  the  bank- 
er and  the  corporation.  Such  appeals  come  to  men  in  debt,  out 
of  employment  and  downcast  in  spirits  with  great  seductive  force. 
Evidence  enough  of  that  fact  is  on  record  in  the  election  returns 
of  1896. 

The  pertinence  of  this  retrospect  is  the  proof  which  it  affords 
of  the  fact  that  so  large  a  portion  of  the  people  of  the  United 
States  have  no  conception  of  the  nature  or  importance  of  a  money 
standard.  In  such  a  country  as  ours  the  legal  monetary  stand- 
ard is  whatever  a  majority,  or  a  plurality,  it  may  be,  of  the  voters 
say  it  shall  be.  It  is  therefore  of  the  utmost  importance  that 
the  standard  shall  not  only  be  distinctly  declared  in  the  law  but 
clearly  fixed  in  the  minds  of  the  people  as  the  first  and  indis- 
pensable element  of  a  sound  monetary  system.  All  history  is 
evidence  that  the  people  who  suffer  most  from  a  degradation  of 
the  standard  are  not  the  rich  and  poM'erful,  but  the  poor  and 
helpless.  Compared  with  this  danger  all  existing  evils  of  mere 
kind  or  quantity  of  our  present  money  are  relatively  only  incon- 
veniences.   The  first  need  of  the  situation  is  to  fortify  the  standard. 

There  are  some  considerations  as  to  the  standard  which  ought 
to  commend  themselves  to  the  judgment  of  the  country.  There 
must  be  some  standard  of  value.  The  standard  must  have  a 
market  value  as  a  commodity  independently  of  any  govern- 
mental fiat  and  of  all  legal-tender  laws ;  it  must  be  durable ;  it 
must  be  homogeneous;  it  must  have  a  maximum  of  value  pro- 
portioned to  its  bulk ;  it  must  have,  as  a  commodity,  as  stable 
a  market  value  as  possible,  and  in  order  to  secure  the  stability 
of  that  market  value,  the  relation  between  its  supply  and 
demand  must  be  as  constant  as  possible.  Gold  alone  fulfills 
these  conditions.     The  civilized  world  has,  therefore,  determined 


14 

that  the  standard  shall  be  gold.  No  government,  however 
powerful,  can  in  fact  reverse  that  determination,  or,  without  in- 
jury to  the  interests  of  all  its  people,  attempt  to  establish  any 
other  standard  of  value. 

There  is  a  clear  distinction  between  the  functions  of  money  as 
a  standard  of  value  and  as  a  medium  of  exchange.  While  that 
money  which  is  the  standard  of  value  will  always  serve  also  as 
a  medium  of  exchange,  yet  other  forms  of  currency  of  inferior 
market  value  can  in  no  sense  be  a  satisfactory  standard,  and  can 
be  a  suitable  medium  of  exchange  only  when  their  convertibility 
at  par  into  the  standard  money  is  assured.  Any  possible  cur- 
rency is,  therefore,  of  one  of  two  kinds.  The  first  kind  is  that 
which  has  been  adopted  as  the  standard  of  value.  The  second 
kind  is  that  which  is,  without  reference  to  its  market  value  as  a 
commodity,  receivable  at  par,  because  convertible  at  par  into  the 
standard  money.  To-day  gold  is  the  only  currency  of  the  first 
kind.  United  States  notes,  national  bank  notes,  silver  dollars, 
subsidiary  silver  and  minor  coins,  are  currency  of  the  second 
kind.  The  face  value  of  the  silver  dollars,  the  subsidiary 
silver  and  the  minor  coins  more  or  less  largely  exceeds  their 
bullion  value,  and  they  diiFer  from  the  note  issues  only  in  the 
fact  that  the  material  of  which  they  are  made  has  some  mar- 
ket value  as  bullion.  Under  modern  conditions  of  business, 
purchases,  sales,  loans,  the  discharge  of  debts,  and  even  payments 
of  wages  are  effected  in  great  part  by  drafts,  checks,  or  transfers 
of  credits.  While  the  work  which  the  money,  which  is  the 
standard,  actually  performs  in  the  exchanges  of  the  country  is 
relatively  small,  yet  every  one  of  those  exchanges  is  based  on 
that  standard.  If  all  the  money  of  the  country  is  convertible 
at  par  into  gold,  there  may  then  be  whatever,  and  as  much,  of 
the  representative  forms  of  currency  as  the  convenience  of  the 
people  may  require. 

On  the  other  hand,  if  the  standard  of  value  be  lowered,  there 
necessarily  follows  a  loss  of  public  confidence,  a  lessened  use  of 
credit  and  of  credit  forms  of  currency,  and  a  consequent  diminu- 
tion of  the  effectiveness  of  the  currency. 

The  gold  standard,  therefore,  does  not  mean  gold  monometal- 


15 

isru,  and  it  necessarily  results,  not  in  contraction,  but  in  the  great- 
est possible  expansion  of  the  currency  within  the  bounds  of  safety. 

As  gold  derives  no  value  from  any  legal-tender  law,  nor  any 
value  from  coinage  at  the  mint  beyond  "  the  ascertainment  that 
its  weight  and  purity  are  what  the  law  requires,"  and  the  certi- 
fying by  the  government's  stamp  that  it  possesses  those  qualities, 
it  is,  and  it  ought  to  continue  to  be,  admitted  to  free  coinage. 
On  the  other  hand,  silver,  nickel,  and  copper  should  be  coined 
only  upon  government  account,  into  coins  of  limited  legal- 
tender  quality ;  should  be  issued  from  the  mint  only  in  ex- 
change for  gold  at  par;  and  should  be  re-exchangeable  at 
the  Treasury  in  convenient  multiples  for  gold  coin  at  par.  Under 
this  system  there  could  be  no  arbitrary  contraction  or  expansion 
of  the  coin  currency,  nor  any  tampering  with  the  standard  of 
value,  and  the  people  would  then  carry  to  their  credit  in  the  led- 
ger of  the  Treasury  Department  the  profits  upon  the  coinage  of 
silver,  nickel  and  copper. 

Many  of  our  fellow  citizens  have  hoped  in  all  sincerity  that 
the  problem  of  the  standard  would  be  solved  by  international 
bimetallism.  An  earnest  effort  has  been  made  to  realize  that 
hope,  but  it  must  now  be  abandoned.  The  only  alternatives, 
therefore,  are  the  continued  maintenance  of  the  existing  gold 
standard,  or  the  adoption  of  the  silver  standard.  If  the  latter 
alternative  be  taken,  the  obligations  of  the  United  States,  of  the 
states,  of  all  municipalities,  of  all  private  corjjorations,  and  of  all 
individuals,  the  receipts  of  income  from  every  source,  the  proceeds 
of  policies  of  insurance,  the  deposits  in  banks  and  saving  funds, 
and  the  wages  of  labor,  will  then  be  payable  in  a  debased  and 
depreciated  currency;  and  individual  and  corporate  bankruptcy, 
and,  worst  of  all,  national  dishonor,  will  follow.  If  the  former 
alternative  be  taken,  and  the  necessary  means  be  adopted  to 
secure  the  stability  of  the  gold  standard,  the  credit  of  the  country 
will  be  established ;  the  national  debt  can  be  refunded  at  lower 
interest  rates ;  the  surplus  capital  of  the  world  will  come  here 
to  find  profitable  investment;  and  our  country  will  enjoy  the 
prosperity  that  follows  a  currency  system  based  upon  a  stable 
standard  of  value. 


16 

The  means  necessary  to  establish  and  preserve  popular  confi- 
dence  in  the  continued  maintenance  of  the  gold  standard  are : 

1.  An  explicit  legislative  definition  of  the  gold  standard,  and 
a  pledge  that  it  will  be  maintained. 

2.  A  requirement  that  all  obligations,  public  and  private, 
unless  otherwise  stipulated  in  the  contract,  shall  be  payable  in 
conformity  with  that  standard, 

3.  The  adoption  of  a  plan  for  the  gradual  retirement  of  the 
outstanding  note  issues  of  the  government. 

As  the  gold  deposited  for  certificates  cannot  be  used  by  the 
government,  and  as  the  issue  of  gold  certificates  is  of  no  advant- 
age to  the  government  or  to  the  people,  there  does  not  seem  to 
be  any  reason  for  their  continued  issue. 

THE  SILVER  CUREENCY. 

The  silver  certificates,  being  the  expressed  representatives, 
dollar  for  dollar,  of  silver  dollars  deposited,  ought  to  continue 
to  be  exchangeable  only  for  silver  dollars. 

The  face  value  of  the  subsidiary  silver  coins  more  largely 
exceeds  their  bullion  value  than  is  wise  even  in  the  case  of  token 
coins.  They  might  be  called  in  and  recoined ;  but  the  expense 
and  inconvenience  of  that  operation  are  such  as  to  render  its 
postponement  advisable. 

As  the  owners  of  a  large  stock  of  silver  bullion,  silver  dollars, 
and  subsidiary  silver,  the  people  of  the  United  States  are  directly 
interested  in  the  continued  use  of  silver  as  currency,  provided 
that  the  silver  can  continue  to  be  maintained  at  par  with  gold. 

The  silver  dollar  is  by  reason  of  its  size  and  weight  an  incon- 
venient coin  to  carry  about  the  person,  or  to  use  in  change.  Most 
people,  therefore,  do  not  desire  to  use  silver  dollars  as  currency, 
if  they  can  have,  as  representatives  of  the  coin  dollars,  notes  in 
denominations  of  $1,  $2  and  $5.  Even  with  the  inducement 
of  free  transportation  from  the  Treasury,  it  has  never  been 
possible  to  force  into  circulation  at  any  one  time  an  amount  of 
silver  dollars  exceeding  $67,000,000,  and  there  are  now  out- 
standing only  $60,196,778,  of  which  at  least  $10,000,000  are 
held  by  the  national  and  state  banks.     On  the  other  hand,  there 


17 

arc  in  circulation  $354,35/3,031  of  notes  of  the  denominations 
of  $1,  $2  and  $5,  of  which  $154,965,473  are  silver  certificates 
and  $199,389,558  are  United  States  notes,  Treasury  notes  of 
1890,  and  national  bank  notes.  Of  the  total  amount  of  silver 
certificates  outstanding,  $154,965,473  are,  as  before  stated,  in 
denominations  of  $1,  $2  and  $5,  and  $229,205,081  are  in  larger 
denominations.  If,  therefore,  the  United  States  notes.  Treasury- 
notes  of  1890,  and  national  bank  notes  of  the  denominations  of 
$1,  $2  and  $5  be  retired,  their  places  can  be  taken  by  a  further 
issue  of  silver  certificates  to  the  amount  of  $199,389,558  in  de- 
nominations of  $1,  $2  and  $5,  and  an  equivalent  amount  of  sil- 
ver certificates  of  larger  denominations  be  retired,  leaving  of  the 
$229,205,031  now  outstanding  in  larger  denominations  $29,- 
815,473  to  be  redeemed  in  silver  dollars  when  presented  for  re- 
demption. If,  also,  the  silver  dollars  now  in  circulation  and 
amounting  to  $60,196,778  should  be  deposited  in  the  Treasury, 
the  balance  of  $29,815,473  of  silver  certificates  in  denominations 
exceeding  $5  could  be  replaced  by  an  issue  of  silver  certificates 
in  denominations  of  $1,  $2  and  $5,  and  there  might,  without 
any  expansion  of  the  present  outstanding  circulation,  be  a 
further  issue  of  silver  certificates  in  denominations  of  $1,  $2  and 
$5,  amounting  to  $30,381,305,  based  upon  the  silver  dollars  so 
deposited.  The  place  of  the  retired  United  States  notes,  Treas- 
ury notes  of  1890  and  national  bank  notes  of  small  denomina- 
tions would  be  taken  by  an  issue  of  notes  of  large  denomina- 
tions of  the  same  kinds,  so  long  as  the  United  States  notes  and 
Treasury  notes  of  1890  are  unredeemed. 

The  effect  of  this  plan  will  be  that  the  currency  of  the  country 
of  all  denominations  below  $10  will  be  silver  coin,  and  silver 
certificates  based  upon  silver  dollars  held  in  the  Treasury,  sup- 
plemented by  gold  coins  of  the  denominations  of  $2.50  and  $5. 

The  government  has  received  the  full  face  value  for  all  the 
silver  dollars  which  have  been  put  in  circulation  either  in  kind 
or  by  means  of  representative  certificates.  The  silver  coins 
differ  from  the  note  issues  only  in  the  fact  that  the  material 
of  which  they  are  made  has  some  market  value  as  bullion.  They 
are,  nevertheless,  as  justly  obligations  of  the  government  and  as 
3 


18 

properly  excliangeable  at  par  for  gold  as  the  United  States  notes. 
A  gold  reserve  must,  therefore,  be  provided  for  such  ex- 
chano^e :  but  as  the  retirement  of  the  United  States  notes, 
Treasury  notes  of  1890,  and  national  bank  notes  of  denomina- 
tions less  than  $10  will  leave  the  silver  dollar,  the  silver  certifi- 
cates in  denominations  of  $1,  $2  and  $5,  the  subsidiary  silver,  the 
minor  coins,  and  the  gold  coins  of  the  denominations  of  $2.50 
and  $5  as  the  only  currency  for  small  transactions,  it  is  probable 
that  the  trade  of  the  country  will  keep  the  silver  and  its  repre- 
sentatives in  circulation,  and  prevent  the  coming  in  of  any 
considerable  quantity  of  that  currency.  It  is  also  to  be  observed 
that  when  popular  confidence  shall  have  been  restored  as  to  the 
maintenance  of  the  gold  standard  and  the  security  of  our  cur- 
rency system,  there  will  be  no  general  desire  to  exchange  silver 
dollars  or  silver  certificates  for  gold,  for  the  silver  currency  will 
then  be,  beyond  question,  as  good  as  gold. 

The  Treasury  has  an  asset  in  its  silver  bullion  not  held 
against  outstanding  certificates,  which  may  be  utilized  by  sell- 
ing it  from  time  to  time,  as  the  German  government  has  done 
with  its  surplus  silver.  Of  course,  such  sales  should  be  carefully 
made  in  such  quantities  as  not  to  unduly  depress  the  niarket  for 
silver  bullion.  It  is,  therefore,  suggested  that  authority  be  given 
to  the  Secretary  of  the  Treasury  to  make  such  sales  in  his  dis- 
cretion. 

It  may  be  well  to  consider  whether  the  sum  of  $452,713,792 
of  silver  dollar  pieces,  with  seigniorage  of  over  50  per  cent., 
which  remain  as  the  evidence  of  a  serious  danger  to  the  existing 
standard,  is  not  too  large  to  be  permanently  retained  in  our  cur- 
rency ;  and  if  this  should  prove  to  be  the  case,  whether  a  suf- 
ficient number  of  these  silver  dollars  should  not  be  ultimately, 
although  not  immediately,  withdrawn  and  sold  as  bullion. 

It  is  an  essential  part  of  a  sound  system  of  finance,  that  the 
government  should  raise  by  taxation  a  revenue  adequate  to  its 
necessary  expenditures.  But  as  the  revenues  are  sometimes 
deficient,  it  is  advisable  that  power  be  given  to  the  Treasury 
to  sell  short-term  bonds  to  supply  such  deficiency.  Under  exist- 
ing legislation  only  long-term  bonds  can  be  sold ;  and  if  the 


19 

government  comes  into  possession  of  a  surplus,  such  bonds  can- 
not be  retired  save  by  purchasing  them  at  a  premium.  On  the 
other  hand,  short-term  bonds  can,  under  a  securely-established 
currency  system,  be  negotiated  at  low  interest  rates ;  can  be,  if 
necessary,  extended  at  maturity,  and  can  be  retired  by  purchase 
in  advance  of  maturity  without  a  heavy  loss  in  payment  of  pre- 
mium. For  similar  reasons  it  is  suggested  that  long-term  bonds 
should  contain  a  reserved  option  to  the  government  of  retire- 
ment. 

It  is  to  the  interest  of  the  government  and  of  the  people  that 
all  the  people  should  have  an  equal  opportunity  of  investing  their 
savings  in  the  obligations  of  the  government  when  issued.  As 
the  mass  of  the  people  have  not  the  necessary  facilities  for  the  safe 
custody  of  bonds,  it  is  suggested  that  a  system  be  adopted  of 
inscription  on  the  books  of  the  Treasury,  instead  of  bonds,  simi- 
lar to  that  which  has  long  prevailed  in  the  case  of  the  English 
consols  and  the  French  rentes.  Under  this  system  it  will  be 
possible  to  place  government  loans  by  a  real  popular  subscrip- 
tion. 

THE   DEMAND   OBLIGATIONS   OF   THE 
GOVERNMENT. 

It  is  a  part  of  the  plan  submitted  that  the  demand  obligations 
of  the  government  shall  be  put  in  course  of  retirement  by  a  pro- 
cess which  shall  be  gradual  in  its  operation  as  respects  the 
current  money  and  business  of  the  country,  but  which  will 
lead  ultimately  to  the  substitution  of  other  forms  of  money  in 
their  place.  The  demand  obligations,  properly  so  called,  consist 
of  the  United  States  notes  or  "  greenbacks,"  amounting  to 
$346,681,016,  and  the  Treasury  notes  of  1890,  amounting 
to  $109,313,280.  While  the  former  are  not  in  terms  payable 
in  gold,  and  the  latter  are  by  law  payable  in  gold,  or  silver,  at 
the  discretion  of  the  Secretary  of  the  Treasury,  it  is  obviously 
necessary,  in  order  to  keep  good  the  pledge  of  the  government 
to  maintain  the  parity  of  the  two  metals  as  coined,  to  pay  all 
its  notes  in  gold  when  gold  is  demanded  by  the  holder.     So  that, 


20 

in  a  practical  sense,  the  note  obligations  of  the  government 
payable  in  gold  on  demand  must  be  reckoned  at  the  sum  of  the 
greenbacks  and  the  coin  notes,  that  is,  $455,994,296. 

The  measures  recommended  in  relation  to  these  obligation^ 
may  be  briefly  summarized  as  follows : 

1.  The  separation  of  the  note  issuing  and  redeeming  opera- 
tions of  the  Treasury  from  its  ordinary  fiscal  operations  by  the 
creation  of  a  Division  of  Issue  and  Redemption,  and  the  transfer 
to  it  of  the  gold  reserve  and  other  resources  held  against  ob- 
ligations ;  the  government  notes  to  be  paid  in  gold  coin  on 
demand  through  that  division. 

2.  The  reserve  to  be  maintained  from  revenue  when  adequate, 
and  by  sale  of  bonds  when  necessary ;  the  proceeds  of  such  sales 
to  be  used  for  that  specific  purpose,  and  no  other. 

3.  Notes  paid  to  be  canceled  as  paid,  up  to  the  amount  of 
$50,000,000 ;  the  cancelation  thereafter  for  five  years  not  to  ex- 
ceed the  increase  of  bank  notes.  After  five  years  the  notes 
paid  to  be  retired  at  a  rate  not  exceeding  20  per  cent,  per  annum 
of  the  amount  then  outstanding;  at  the  end  of  ten  years  the  legal- 
tender  quality  of  the  notes  then  outstanding  to  cease. 

4.  No  note,  once  paid,  to  be  reissued  otherwise  than  in  exchange 
for  gold,  except  that,  in  case  of  an  excessive  accumulation  of  re- 
deemed and  uncanceled  notes  in  the  Division  of  Issue  and  Re- 
demj)tion,  the  Secretary  of  the  Treasury  may  use  them  in  the 
purchase  of  United  States  bonds  for  the  benefit  of  the  Division 
of  Issue  and  Redemption ;  such  bonds  to  be  held  in  that  division 
and  sold  for  the  benefit  of  the  redemption  fund  when  directed  by 
the  Secretary  of  the  Treasury. 

At  the  present  time  the  government  has  no  fund  for  the  pay- 
ment of  its  demand  obligations  except  the  general  balance  in  the 
Treasury  applicable  alike  to  the  payment  of  all  dues.  Our 
revenues  are  more  or  less  uncertain  in  amount ;  our  expenditures 
are  large  and  growing,  and  liable  to  vary  with  changes  in  the 
spirit  of  the  times  and  the  disposition  of  Congress  and  the  peo- 
ple. It  is,  therefore,  uncertain  whether  we  shall  have  at  any 
})articu]ar  time  an  adequate  fund  for  the  redemption  of  the  de- 
mand obligations  without  recourse  to  borrowing.     Borrowing  is 


21 

an  ineifectual  resource,  because,  under  the  law  as  it  stands,  the 
notes  which  have  been  paid  must  be  returned  to  circuhition,  and, 
so,  may  be  used  over  and  over  to  draw  out  the  borrowed  gold. 
The  uncertainty  of  this  situation  is  increased  by  the  fact  that  the 
issue  of  bonds  rests  with  the  executive  department,  and  whether 
it  will  be  resorted  to  or  not  will  depend  upon  the  personal  views 
and  discretion  of  the  officials  at  the  head  of  that  department. 
More  serious  still  is  the  fact  that  it  is  in  the  power  of  the 
executive  department,  as  the  law  now  stands,  to  decide  absolute- 
ly whether  the  government  notes  shall  be  paid  in  gold  or  in  sil- 
ver. An  end  ought  to  be  put  to  this  anomalous  and  hazardous 
situation  by  making  specific  and  adequate  provision  for  the  pay- 
ment of  the  demand  obligations,  and  directing  in  the  law  that 
such  payment  shall  be  in  gold  at  the  demand  of  the  holder. 

It  is  regarded  as  certain  that  if  this  were  done  there  would  be 
comparatively  little  presentation  of  notes  at  the  Treasury  for 
redemption,  in  the  absence  of  serious  public  alarm,  and  that 
the  best  possible  security  against  the  recurrence  of  such  alarm 
would  be  attained.  The  provision  authorizing  the  purchase  of 
bonds  during  the  period  mentioned  is  recommended,  with  the 
belief  that  it  would  enable  the  Secretary  of  the  Treasury  to  pre- 
vent any  injurious  contraction.  The  bonds  purchased  with  the 
notes  returned  to  circulation  would  furnish  the  means  with 
which  to  redeem  them  when  presented  again. 

A  proposal  to  retire  the  government  notes  may  be  received 
at  first  with  disfavor  by  some  persons,  but  it  must  be 
supposed  that,  upon  due  reflection,  preferences  which  are 
to  a  large  extent  merely  sentimental  will  yield  to  argu- 
ments resting  on  solid  grounds  of  safety  and  advantage  to  the 
government  and  the  people.  All  good  citizens  must  desire  that 
the  credit  of  the  government  shall  rest  on  a  basis  so  secure  that 
no  wind  that  can  blow  will  ever  shake  it ;  that  the  standard  by 
which  all  obligations  and  values  are  measured  shall  be  the  most 
perfect  expression  of  truth  and  honesty  and  unchangeableness 
which  is  possible  of  attainment ;  and  that  all  the  money  in  cir- 
culation shall  be  up  to  that  standard  in  its  value,  and  shall,  in 
respect  to  its  form  and  quantity  and  distribution,  serve  every 


22 

requisite  of  commercial  and  personal  use  as  equally  and  com- 
pletely as  is  in  the  nature  of  things  possible.  If  it  is  necessary 
in  order  to  accomplish  these  results  to  relieve  the  government 
from  the  function  of  supplying  money  in  the  form  of  its  own 
notes,  it  is  only  necessary  to  make  that  fact  clear  to  the  people 
to  secure  their  approval  of  the  measure.  Not  to  believe  this 
would  be  to  despair  of  the  capacity  of  the  people  for  wise  and 
successful  government. 

A  government  paper  currency  educates  the  people  who  use  it 
in  false  notions  concerning  money.  Such  a  currency,  circulating 
year  after  year  without  redemption,  appears  to  those  who  do  not 
look  at  it  critically  to  derive  its  value  from  the  "  government 
stamp."  It  ceases  to  be  regarded  as  a  promise  to  pay  money,  and 
is  thought  to  possess  the  virtue  of  money  in  and  of  itself.  It  is 
so  easy  to  create  it  that  in  any  emergency  the  call  for  more  is 
perfectly  natural.  There  can  be  no  doubt  that  the  aberration 
of  judgment  on  the  money  question  by  so  many  of  our  people  in 
recent  years  has  been  largely  due  to  the  miseducating  influences 
of  the  greenback  currency.  The  young  and  middle-aged  men 
of  to-day  have  grown  up  in  a  vitiated  financial  atmosphere. 

Such  a  currency  also  lacks  the  important  quality  of  automatic 
adaptability  to  the  varying  demands  of  business.  A  paper  dol- 
lar is  a  useful  form  of  currency  so  long  as  there  is  legitimate 
use  for  it.  When  there  is  no  legitimate  use  for  it,  it  becomes 
a  superfluous  and  injurious  thing — a  temptation  to  speculation, 
extravagance  and  unwise  business  ventures.  A  paper  currency 
created  by  legislation  is  fixed  in  volume  by  the  law  of  its  creation, 
and  can  neither  contract  nor  expand  in  response  to  those  varying 
conditions  which  are  bound  to  occur  in  the  affairs  of  men. 

More  important  than  this  is  the  fact  that  such  a  currency  puts 
upon  the  government  the  burden  of  maintaining  the  credit  of 
all  the  financial  institutions  of  the  country.  The  government 
notes  are  as  good  as  gold  only  so  long  as  the  government  re- 
deems them  in  gold.  If  it  should  fail  in  that,  all  bank  notes, 
bank  deposits,  insurance  losses,  and  debts  and  dues  of  every 
kind  not  si)ecifically  payable  in  gold  would  be  payable  in 
the  depreciated  paper  or  in  silver.  Every  passing  incident,  there- 


23 

fore,  which  raises  an  apprehension,  however  slight,  of  a  possi- 
bility, however  remote,  that  the  government  may  be  unable  or 
unwilling  to  maintain  gold  payment  of  its  obligations  sends  a 
nervous  tremor  through  the  whole  business  system  of  the  coun- 
try. A  sovereign  government  cannot  be  compelled  to  pay  its 
debts ;  it  pays  them  only  when  it  wills  so  to  do ;  and  there  is 
in  the  public  mind  more  or  less  doubt  as  to  the  continuance 
of  the  will  of  our  government  to  pay  its  demand  obligations 
in  money  satisfactory  to  the  holders  thereof.  In  these  days 
of  large  invested  capital  and  small  profits  such  a  condition  is  a 
serious  drag  on  business  enterprise. 

The  existence  of  a  large  outstanding  debt  payable  on  demand 
is  also  a  source  of  weakness  to  the  government  in  its  interna- 
tional relations.  Modern  warfare  is  so  expensive  that  it  is  al- 
most as  much  a  matter  of  money  as  of  men.  A  nation  suddenly 
confronted  by  the  alternative  of  war  or  dishonor  would  be  greatly 
handicapped  by  a  large  demand  debt  which  it  must  provide  for 
at  once.  Great  additional  force  is  given  to  this  consideration  by 
the  fact  that  it  would  be  scarcely  possible  for  this  nation  to  en- 
gage in  war  in  its  present  situation — counting  as  part  of  the  sit- 
uation the  imperfect  development  of  clear  conceptions  on  the 
subject  of  money  in  the  minds  of  the  people — without  a  suspen- 
sion of  specie  payments  and  a  resort  to  further  issues  of  govern- 
ment notes.  There  is  no  occasion  to  criticise  those  patriotic  men 
who  believed  that  the  issue  of  greenbacks  was  necessary  to  save 
the  Union,  But  the  world  has  advanced  in  financial  knowledge 
and  skill  since  then.  There  is  no  doubt  that  if  our  government 
were  relieved  of  its  existing  demand  obligations,  and  our  currency 
system  put  in  working  order  upon  a  gold  basis,  it  would  be  entirely 
possible  for  us  to  go  through  a  war  without  suspension  of  specie 
payment,  or  any  derangement  of  our  monetary  system.  If  war 
should  come,  the  value  to  the  country  of  the  ability  to  thus 
avoid  the  indirect  losses  following  from  depreciated  currency, 
inflated  prices  and  financial  demoralization  would  be  so  great 
that  the  burden  of  paying  off  now  our  demand  obligations  would 
be  as  nothing  in  comparison. 

While  the  silver  dollars  are  not,  by  the  terms  of  the  law,  ex- 


24 

changeable  for  gold  coin,  their  current  value  is  sustained  by  the 
promise  of  the  government  to  maintain  their  parity  with  gold. 
So  that  we  have  a  total  volume  of  paper  and  silver  in  circulation 
amounting  to  $908,728,087,  all  resting  for  its  value  on  the 
credit  of  the  government,  except  in  so  far  as  the  bullion  in  the 
silver  dollars  has  value.  That  credit  is  maintainable  only  as  a 
whole.  The  paper  of  the  United  States  could  not  be  dishonored 
and  its  silver  upheld.  It  is  necessary,  therefore,  that  the  gov- 
ernment shall  keep  a  large  fund  in  gold,  and  continue  to  do  so 
so  long  as  the  credit  currency  is  outstanding.  Such  a  fund 
in  the  hands  of  the  government  is  defenceless  against  attack. 
In  countries  where  the  government  has  no  demand  debt  out- 
standing, and  the  gold  reserve  is  held  by  banks,  the  nation's 
stock  of  gold  is  capable  of  some  degree  of  protection  through  the 
rate  of  interest  charged  for  loans.  But  our  government  has  no 
such  resource.  Its  great  gold  reserve  is  an  open  mine  free  to  all 
who  bring  its  notes.  The  exigencies  of  war  or  commerce  are 
liable  to  create  sudden  and  great  demands  for  gold.  And  as  the 
entire  monetary  system  of  the  country  hangs  upon  that  one  re- 
serve, the  situation  is  one  of  uncertainty  and  hazard  against 
which  no  insurance  is  possible,  and  which  is  bound  to  continue 
while  the  government  demand  obligations  are  extant  in  large 
volume.  It  would  go  far  to  relieve  the  perennial  strain  of  this 
situation  and  strengthen  our  financial  position  at  home  and 
among  nations  to  transfer  this  burden  to  the  banks  and  other 
moneyed  institutions. 

As  against  these  serious  disadvantages  there  is  no  advantage 
which  can  possibly  be  claimed  for  paper  money  in  the  form  of 
government  notes  over  any  other  form  of  paper  money  equally 
good — that  is,  equally  current  in  all  parts  of  the  country  and 
equally  certain  of  redemption  in  specie  on  demand — except 
the  saving  of  interest  on  so  much  of  the  public  debt  as  is 
represented  by  the  notes.  Our  national  bank  notes  have 
served  the  uses  of  the  people  as  well  as  greenbacks.  In  all 
ordinary  business  transactions  no  one  cares  which  he  receives  or 
pays  out.  The  supposed  economy  of  the  greenbacks  is  more 
apparent  than  real ;  indeed,  when  we  consider  all  the  facts  they 


25 

are  an  extremely  costly  form  of  money.  To  keep  them  good 
requires  the  maintenance  of  a  large  gold  reserve  in  the  Treasury, 
which  offsets  the  saving  of  interest  to  the  extent  of  one  fourth 
or  more.  When  conditions  arise  which  threaten  to  deplete  that 
reserve  and  compel  a  resort  to  extraordinary  measures  to  protect 
it,  no  limitation  of  cost  can  be  observed,  and  it  is  impossible  to 
know  what  sacrifice  may  become  necessary. 

In  order  to  create  the  gold  reserve  required  for  the  resump- 
tion of  specie  payments  in  1879,  United  States  bonds  to  the 
amount  of  $95,500,000  were  sold,  and  most  of  which  are  still 
outstanding  in  a  refunded  form.  During  the  years  1894,  1895 
and  1896  bonds  to  the  amount  of  $262,315,400  were  sold. 
Throughout  those  years  there  was  a  constant  drain  of  gold  to 
redeem  United  States  notes.  By  the  law  of  1878  it  was  pro- 
vided that  United  States  notes  "  shall  not  be  retired,  canceled 
or  destroyed,  but  they  shall  be  reissued  and  paid  out  again  and 
kept  in  circulation."  There  being  a  deficit  in  the  ordinary  rev- 
enue, these  notes  continued  to  go  out  again  and  again  in  pay- 
ment of  ordinary  expenses.  Whether  the  deficit  would  have 
required  the  sale  of  bonds  if  there  had  been  no  want  of  public 
confidence  in  the  payment  of  the  notes,  and  they  had  not  con- 
tinued to  be  presented  for  redemption,  is  a  point  upon  which 
there  may  be  a  difference  of  opinion.  Not  to  enter  upon  that 
question  closely,  it  is  clear  that  with  interest  to  pay  on  three 
hundred  and  fifty-seven  million  dollars  of  indebtedness  incurred 
chiefly,  if  not  wholly,  in  consequence  of  the  existence  of  the 
government  notes,  and  one  hundred  millions  of  reserve  lying 
idle  in  the  Treasury,  the  saving  in  interest  by  the  United  States 
notes  is  a  small  gain  compared  with  the  unending  burden  of 
providing  for  their  redemption. 

In  considering  the  cost  of  these  operations,  it  is  necessary  to 
take  into  account,  also,  the  expense  of  engraving,  printing,  book- 
keeping, and  other  incidents.  '  From  all  of  which  it  appears 
that  instead  of  saving  money  to  the  people,  the  United  States 
notes  have  been  and  are  now  costing  them  a  large  sum  annually. 
This  cost  is  liable  to  be  increased  by  the  further  issue  of  bonds 


26 

for  the  protection  of  these  notes  in  emergencies, — not  now  pres- 
ent, nor  immediately  threatening,  but  always  possible. 

Between  1st  January,  1879,  and  1st  November,  1897,  the 
Treasury  paid  United  States  notes  in  gold  to  the  amount  of 
$507,470,149,  being  $160,789,133  in  excess  of  $346,681,016,  the 
entire  amount  outstanding  at  the  resumption  of  specie  payments ; 
M^hich  paid  and  repaid  and  yet  undiminished  amount  still  remains 
outstanding  to  be  paid  again,  and,  unless  some  change  be  made 
in  the  existing  law,  again  and  again. 

Between  14th  July,  1890,  and  1st  November,  1897,  Treasury 
notes  of  1890,  issued  for  the  purchase  of  silver  bullion,  have  been 
redeemed  in  gold  coin  and  reissued  to  the  amount  of  $90,680,879. 

Moreover,  we  are  carrying  a  burden  put  upon  us  by  the  doubt 
and  uncertainty  which  the  presence  of  this  large  demand  debt 
of  the  government  in  the  form  of  current  money  produces,  which 
no  man  can  estimate.  Any  one  of  a  number  of  circumstances 
might  cause  a  suspension  of  gold  payment  of  its  notes  by  the 
government.  A  war,  a  failure  of  revenue,  a  commercial  revul- 
sion, an  election,  a  weak  President, — any  one  of  these  unfavor- 
able conditions,  exciting  alarm  and  then  panic,  might  cause  the 
Treasury  to  be  depleted  of  its  gold  and  its  notes  to  be  dishonored. 
The  injury  which  all  business  suffers  from  this  condition  of  the 
currency  is  none  the  less  real  because  it  is  not  distinctly  perceived. 
The  evil  may  go  long  unnoticed,  like  friction  in  machinery  or 
malaria  in  the  air ;  but  it  has  its  effect  nevertheless.  When  it 
comes  to  an  acute  manifestation  of  the  evil,  such  as  we  have 
experienced  within  the  last  five  years,  the  loss  occasioned  is 
beyond  computation.  Many  concurring  causes  contributed  to  the 
business  depression  which  the  people  of  the  United  States  have 
suffered  within  that  period ;  but  it  cannot  be  doubted  that  the 
fact  that  the  entire  paper  currency  of  the  country  consisted  of  or 
rested  upon  notes  of  the  government,  and  that  there  was  an 
uncertainty  as  to  the  redemption  of  those  notes,  was  the  chief 
cause  of  that  great  disaster.  All  the  government  notes  outstand- 
ing, and  all  the  interest  they  have  saved  since  they  were  issued, 
would  pay  only  a  small  fraction  of  the  loss  which  the  American 
people  have  suffered  within  that  time. 


27 


THE   BANKING  SYSTEM. 

Under  the  present  system  a  bank  may  issue  circulation  not 
exceeding  90  per  cent,  of  its  paid-up  capital,  and  also  not  ex- 
ceeding 90  per  cent,  of  the  par  value  of  the  bonds  deposited. 
Each  bank  is  required  to  deposit  with  the  Treasury  a  redemp- 
tion fund  of  5  per  cent,  of  its  outstanding  circulation  ;  and  the 
notes  are  secured  by  a  first  lien  on  all  the  assets  of  the  bank, 
including  the  liability  of  the  shareholders.  While  in  some  cases 
shareholders  of  and  depositors  in  national  banks  have  lost  by 
unskillful  or  unfaithful  management,  yet  the  bank  circulation 
lias  been  so  well  secured  that  no  holder  of  a  national-bank  note 
has  ever  had  occasion  to  inquire  what  bank  issued  the  note,  or 
has  ever  lost  any  part  of  the  amount  of  the  note.  But  the  rel- 
ative increase  in  the  number  of  the  banks  and  decrease  in  the 
amount  of  the  issue  of  the  circulation  shows  that  the  system 
should  be  so  amended  that,  while  the  notes  issued  thereunder 
shall  be  as  adequately  secured  as  under  the  present  system,  there 
will  yet  be  an  increased  issue  of  bank  notes,  and  an  outflow  and 
inflow  of  those  notes  as  the  business  of  the  country  may  require. 

A  note  circulation,  issued  under  the  present  system,  unques- 
tionably satisfies  the  condition  of  security,  but  is  open  to  grave 
objections. 

1.  It  presupposes  a  continuing  issue  of  government  bonds, 
when  it  ought  to  be  the  national  policy  to  steadily  reduce  and 
ultimately  extinguish  the  debt  of  the  United  States. 

2.  The  investment  in  bonds  diminishes  the  funds  of  the  bank 
available  for  loans  to  its  customers. 

3.  Such  a  currency  does  not  increase  in  volume  with  a  tempo- 
rary demand  for  more  currency,  nor  decrease  with  the  cessation 
of  the  demand. 

All  the  conditions  can  be  met  by — 

1.  A  national  system  with  improved  regulations  as  to  exam- 
ination, supervision,  etc. 

2.  The  issues  to  be  based  upon  those  readily  convertible  assets 
which  represent  the  exchangeable  wealth  of  the  country  in  its 
natural  products  and  manufactured  goods. 


28 

3.  A  limitation  of  the  amount  of  the  issues  to  the  unim- 
l^aircd  capital  of  the  issuing  bank. 

4.  A  further  security  in  a  common  guaranty  fund. 

5.  The  continuance  of  the  present  redemption  fund  and 
method  of  redemption,  with  the  extension  of  the  places  of  re- 
demption under  the  approval  of  the  Secretary  of  the  Treasury. 

6.  A  further  security  in  the  liability  of  the  shareholders  to 
the  full  amount  of  the  par  of  their  shares. 

The  chief  difference  of  the  proposed  from  the  existing  system 
of  bank  notes  is  that  it  gradually  does  away  with  the  require- 
ment that  there  shall  be  a  deposit  of  bonds  with  the  government 
as  a  condition  for  the  issuance  thereof.  As  now,  the  notes  are 
to  be  a  first  lien  upon  all  the  resources  of  the  banks,  including 
the  stockholders'  liabilities.  This  change  is  necessary  because 
of  the  scarcity  of  United  States  bonds;  and  the  attempt  to  sub- 
stitute other  bonds  would  lead  to  many  evils.  The  change  is 
wise  because  it  permits  the  issuance  of  notes  in  the  way  and 
at  the  time  when,  and  for  the  purpose  for  which,  they  Avould 
be  issued  under  natural  conditions,  if  no  law  prevented.  Such 
a  system  would  more  perfectly  than  any  other  give  the  country 
a  circulating  medium ;  it  would  readily  and  quickly  adjust 
itself  from  season  to  season  to  meet  the  wants  of  the  business 
of  the  country  requiring  bank  notes  for  its  convenient  trans- 
action. Under  the  present  system,  the  problem  presented  to  a 
bank,  when  its  customers  call  for  currency,  is  not  the 
amount  of  its  own  assets,  but  its  ability  and  desire  to  make 
an  investment  in  something  quite  apart  from  its  usual  bus- 
iness as  a  bank,  in  order  that  it  may  be  in  a  position  to  pro- 
vide a  man  who  wishes  to  move  property  or  employ  labor  with 
the  tools  most  convenient  at  the  time  for  his  purpose.  Notes 
secured  as  herein  provided  cannot  fail  to  be  safe,  because,  being 
based  upon  all  the  resources  of  all  the  banks  issuing  them,  they  are 
based  upon  the  whole  business  of  the  country,  and  that  business 
is  the  thing  which  gives  life  and  value  to  all  securities,  government, 
municipal,  railway,  and  individual  obligations.  Should  all  the 
resources  of  the  banks  ever  so  shrink  in  value  as  not  to  be  ample 
security  for  the  amount  of  notes  that  could  be  issued  under  this 


29 

plan,  then  all  other  securities,  even  government  bonds,  would 
become  valueless.  The  banks  are  bound  together  for  the  security 
of*  these  notes  to  accomplish  the  same  purpose  that  the  deposit 
of  bonds  is  intended  to  accomplish,  namely,  to  guard  against 
loss  through  the  misfortune  or  bad  management  of  single  banks, 
and  thus  save  the  holder  of  a  bank  note  the  need  of  ascertaining 
the  standing  of  any  bank.  The  objection  that  is  sometimes 
made  that  the  larger  banks  in  the  great  cities  would  not 
issue  notes  because  of  an  apprehended  liability  for  other  banks, 
is  shown  by  statistics  to  be  groundless.  1893  was  the  year  of 
largest  bank  failures ;  but  had  all  the  banks  of  the  country  then 
iasued  notes  up  to  80  per  cent,  of  their  capital,  the  amount  of 
their  assessment  to  make  good  the  ascertained  deficiencies  of  that 
year  up  to  the  time  of  the  Comptroller's  report  of  1896  would 
have  been  only  a  fraction  of  1  per  cent.  Had  80  per  cent, 
of  the  capital  of  all  national  banks  been  issued  in  notes,  upon  the 
proposed  plan,  since  the  beginning  of  the  national  banking  sys- 
tem in  1863,  the  assessment  upon  the  banks  annually  would 
have  been  an  amount  so  insigniticant  that  it  need  not  be  taken 
into  account.  Taking  the  country  banks  as  a  whole,  it  is 
found  that  on  5th  October  last  they  had  $401,000,000  of  the 
$631,000,000  of  national  bank  capital.  Should  they  issue  notes 
up  to  80  per  cent,  of  that  capital,  they  would  have  $321,000,000 
of  notes,  and  there  would  be  $1,956,000,000  of  resources  against 
these  notes,  not  counting  stockholders'  liability. 

If  these  resources  of  the  country  banks  are  insufficient  security 
for  this  amount  of  notes,  they  will  be  insufficient  only  because 
there  would  then  be  such  a  condition  of  business  paralysis  that 
government,  municipal,  and  railway  bonds  would  be  valueless, 
and  also  few,  if  any,  banks  in  the  reserve  cities  would  remain 
solvent.  The  occurrence  of  this  disaster  is  so  improbable  that 
its  consideration  may  be  dismissed. 

In  some  quarters  fear  is  expressed  that  there  would  be  undue 
expansion  under  this  plan.  There  is  no  danger  of  this.  The 
system  of  redemption,  not  only  at  the  banks  but  at  the  Treasury 
in  Washington  and  at  the  sub-treasuries,  would  strongly  guard 


30 

against  that.  The  expansion  over  that  which  could  be  effected 
were  no  notes  issued  at  all  will  be  found,  upon  investigation,  to 
be  small.  Dangerous  expansion  does  not  take  the  form  of  the 
issue  of  bank  notes,  but  of  the  extension  of  credits.  Very  few 
borrowers  take  their  loans  in  the  form  of  bank  notes.  The  bank 
note  is  only  one  form  in  which  he  to  whom  credit  is  given  will 
use  that  credit;  he  can  use  it  equally  well  for  most  purposes  if 
the  loan  is  placed  to  the  credit  of  his  account  by  the  bank 
making  the  loan  to  him,  or  by  some  other  bank  or  by  a  private 
person. 

The  plan  increases  stockholders'  liability,  so  that  each  stock- 
holder is  absolutely  liable  to  assessment  up  to  the  par  of  his 
stock,  and  not  ratably  and  equally  with  every  other  stockholder 
as  now. 

The  existing  tax  of  1  per  cent,  per  annum  on  circulation  is 
repealed.  In  its  place  taxation  of  capital,  surplus,  and  undivided 
profits  is  provided.  The  issue  of  circulating  notes  is  only  one 
form  in  which  a  bank  expresses  its  demand  liability.  The  other 
form,  deposits,  is,  under  the  development  of  modern  banking 
operations,  of  vastly  greater  importance,  and  the  one  which,  in 
cities  and  highly  organized  commercial  communities,  is  most  used. 
In  October,  1897,  the  country  banks  issued  more  than  72  per 
cent,  of  all  notes  issued.  The  reserve  banks,  except  those  of 
the  central  reserve  cities,  New  York,  Chicago  and  St.  Louis, 
issued  more  than  18  per  cent..  New  York  less  than  8  per 
cent.,  and  Chicago  and  St.  Louis  together  about  IJ  per  cent. 
Surplus  and  undivided  profits  and  capital  show  the  profits  and 
property  of  banks,  and  these  are  certainly  more  legitimate  objects 
of  taxation  than  the  mere  instruments  which  banks  may  be  called 
upon  by  their  customers  to  issue  to  serve  chiefly  the  convenience 
of  those  customers.  This  tax  makes  as  equitable  an  apportion- 
ment of  the  expenses  of  the  system  as  can  be  devised. 

The  plan  provides  that  these  notes  shall  be  received  by  banks 
and  by  government  in  payment  of  debts  and  dues  under  the 
same  conditions  as  now.  This  provision  is  made,  not  because  it 
materially  adds  to  the  security  of  the  notes,  but  that  they  may  be 


31 

more  convenient  to  the  people  and  in  aid  of  their  speedy  re- 
demption. 

This  method  of  passing  from  the  present  to  the  new  system  is 
proposed  in  order  that  the  change  may  be  gradual  and  that  the 
country  may  become  accustomed  to  it  in  this  way,  and  also  to 
guard  against  the  possibility  of  undue  sale  of  United  States 
bonds.  Doubtless,  portions  of  the  country  lack  adequate  bank- 
ing facilities;  and  to  meet  this  a  diminution  of  the  minimum 
capital  required  for  banks  in  places  of  small  population,  and 
authority  for  the  establishment  of  branch  banks,  are  advised. 


PLAN  OF  CURRENCY  REFORM. 

I.  Metallic   Cuerency   and   Demand   Obligations. 

1.  The  existing  gold  standard  shall  be  maintained;  and  to  this 
end  the  standard  unit  of  value  shall  continue,  as  now,  to  consist 
of  25.8  grains  of  gold,  nine  tenths  fine,  or  23.22  grains  of  pure 
gold,  as  now  represented  by  the  one  tenth  part  of  the  eagle.  All 
obligations  for  the  payment  of  money  shall  be  performed  in  con- 
formity to  the  standard  aforesaid ;  but  this  provision  shall  not 
be  deemed  to  affect  the  present  legal-tender  quality  of  the  silver 
coinage  of  the  United  States  or  of  their  paper  currency  having 
the  quality  of  legal  tender.  All  obligations  of  the  United  States 
for  the  payment  of  money  now  existing,  or  hereafter  entered 
into,  shall,  unless  otherwise  expressly  provided,  be  deemed,  and 
iield,  to  be  payable  in  gold  coin  of  the  United  States,  as  defined 
in  the  standard  aforesaid. 

2.  There  shall  continue  to  be  free  coinage  of  gold  into  coins  of 
the  denominations,  weight,  fineness,  and  legal-tender  quality,  pre- 
scribed by  existing  laws. 

3.  No  silver  dollars  shall  be  hereafter  coined. 

4.  Silver  coins  of  denominations  less  than  $1  shall  be  coined 
upon  government  account,  of  the  denominations,  weight,  fineness, 
and  legal-tender  quality  prescribed  by  existing  laws. 

0.  Minor  coins  shall  continue  to  be  coined  upon  government 


32 

account,  of  the  denominations,  weight,  fineness,  and  legal-tender 
quality  prescribed  by  existing  laws. 

6.  Subsidiary  and  minor  coins  shall  be  issued  and  exchanged 
as  prescribed  by  existing  laws,  except  as  hereinafter  otherwise 
provided. 

7.  There  shall  be  created  a  separate  division  in  the  Treasury 
Department,  to  be  known  as  the  Division  of  Issue  and  Redemp- 
tion, under  the  charge  of  an  Assistant  Treasurer  of  the  United 
States,  who  shall  be  appointed  by  the  President  by  and  with  the 
advice  and  consent  of  the  Senate. 

8.  To  this  division  shall  be  committed  all  functions  of  the 
Treasury  Department  pertaining  to  the  issue  and  redemption  of 
notes  or  certificates,  and  to  the  exchange  of  coins;  and  this  divis- 
ion shall  have  the  custody  of  the  guaranty  and  redemption 
ftiuds  of  the  national  banks,  and  shall  conduct  all  the  operations 
of  redeeming  national  bank  notes,  as  prescribed  by  law;  and  to 
this  division  shall  be  transferred  all  gold  coin  held  against  out- 
standing gold  certificates,  all  United  States  notes  held  against 
outstanding  currency  certificates,  all  silver  dollars  held  against 
outstanding  silver  certificates,  and  all  silver  dollars  and  silver 
bullion  held  against  outstanding  Treasury  notes  of  1890,  and  all 
subsidiary  and  minor  coins  needed  for  the  issue  and  exchange  of 
such  coins,  and  the  funds  deposited  with  the  Treasury  for  the 
liquidation  of  national  bank  notes.  All  accounts  relating  to  the 
business  of  this  division  shall  be  kept  entirely  apart  and  distinct 
from  those  of  the  fiscal  departments  of  the  Treasury ;  and  the 
accounts  relating  to  the  national  banks  shall  be  kept  separate  and 
apart  from  all  other  accounts. 

9.  A  reserve  shall  be  established  in  this  division  by  the 
transfer  to  it  by  the  Treasurer  of  the  United  States  from  the 
general  funds  of  the  Treasury  of  an  amount  of  gold  in  coin,  and 
bullion,  equal  to  25  per  cent,  of  the  aggregate  amount  of  both 
the  United  States  notes  and  Treasury  notes  issued  under  the 
act  of  July  14,  1890,  outstanding,  and  a  further  sura  in  gold 
equal  to  5  per  cent,  of  the  aggregate  amount  of  the  coinage  of 
silver  dollars.  This  reserve  shall  be  held  as  a  common  fund, 
and  used  solely  for  the  redemption  of  such  notes  and  in  exchange 


33 

for    such    notes,   and    for   silver    and    subsidiary    and    minor 
coins. 

10.  It  shall  be  the  duty  of  the  Secretaiy  of  the  Treasury  to 
maintain  the  gold  reserve  in  the  Division  of  Issue  and  Redemp- 
tion at  such  sum  as  shall  secure  the  certain  and  immediate 
redemption  of  all  notes  and  silver  dollars  presented,  and 
the  preservation  of  public  confidence;  and  for  this  purpose 
he  shall  from  time  to  time,  as  needed,  transfer  from  the 
general  fund  of  the  Treasury  to  the  Division  of  Issue  and 
Redemption  any  surplus  revenue  not  otherwise  appropriated ; 
and  in  addition  thereto  he  shall  be  authorized  to  issue  and  sell, 
whenever  it  is  in  his  judgment  necessary  for  that  purpose,  bonds 
of  the  United  States  bearing  interest  not  exceeding  3  per  cent., 
running  twenty  years,  but  redeemable  in  gold  coin,  at  the  option 
of  the  United  States,  after  one  year ;  and  the  proceeds  of  all 
such  sales  shall  be  paid  into  the  Division  of  Issue  and  Redemp- 
tion for  the  purposes  aforesaid. 

11.  To  provide  for  any  temporary  deficiency  which  may  at 
any  time  exist  in  the  fiscal  department  of  the  Treasury  of  the 
United  States,  the  Secretary  of  the  Treasury  shall  be  authorized, 
at  his  discretion,  to  issue  certificates  of  indebtedness  of  the  Uni- 
ted States,  payable  in  from  one  to  five  years  after  their  date,  to 
the  bearer,  of  the  denominations  of  $50  or  multiples  thereof, 
with  interest  at  a  rate  not  to  exceed  three  per  centum  per 
annum,  and  to  sell  and  dispose  of  the  same  for  lawful  money 
at  the  Treasury  Department,  and  at  the  sub-treasuries  and 
designated  depositories  of  the  United  States,  and  at  such  post- 
offices  as  he  may  select.  And  such  certificates  shall  have  the 
like  privileges  and  exemptions  provided  in  the  act  to  authorize 
the  refunding  of  the  national  debt,  approved  July  14,  1870. 

12.  Whenever  money  is  to  be  borrowed  on  the  credit  of  the 
United  States,  the  Secretary  of  the  Treasury  shall  be  authorized, 
instead  of  issuing  the  usual  forms  of  engraved  bonds,  upon 
receiving  lawful  money  of  the  United  States  in  sums  of  not  less 
than  fifty  dollars  ($50)  in  any  single  payment,  to  cause  a  record 
of  all  such  payments  to  be  made  in  books  to  be  kept  for  that 
purpose  in  Washington,  and  thereafter,  from  time  to  time,  to  pay 


34 

to  those  so  registered  on  such  books  interest  not  exceeding  3  per 
cent,  per  annum  in  gold  coin  on  the  amount  with  which  they  shall 
severally  stand  credited  on  such  books  in  the  same  manner  and 
at  the  same  dates  as  if  they  were  the  holders  and  owners  of  regis- 
tered bonds  of  the  United  States ;  and  he  shall  also  pay  to  those  so 
registered  the  principal  sura  originally  deposited,  in  gold  coin, 
at  the  date  of  maturity  of  such  inscribed  loans.  Suitable 
arrangements  shall  be  made  at  each  and  every  money-order  post- 
office  in  the  United  States  for  receiving  such  payments  into  the 
Treasury  on  like  terms,  as  well  as  for  the  transfer,  on  proper 
identification,  of  any  inscription  on  the  books  in  Washington,  or 
of  any  part  thereof  not  less  than  fifty  dollars  ($50).  No  interest 
shall  accrue  or  be  paid  on  inscriptions  which  shall  have  been  re- 
duced below  fifty  dollars  ($50).  No  charge  of  any  kind  shall  be 
made  by  any  department  or  officer  of  the  government  for  any 
service  in  connection  with  the  receipt  or  transmission  of  the  law- 
ful money,  nor  in  the  transfer  of  inscriptions  on  the  books  at 
Washington. 

13.  The  Division  of  Issue  and  Redemption  shall  on  demand 
at  Washington,  and  at  such  sub-treasuries  of  the  United  States 
as  the  Secretary  of  the  Treasury  may  from  time  to  time  desig- 
nate— 

(a)  Pay  out  gold  coin  for  gold  certificates. 

(6)  Pay  out  gold  coin  in  redemption  of  United  States  notes  or 
Treasury  notes  of  1890. 

(c)  Pay  out  silver  dollars  for  silver  certificates  of  any  denomi- 
nation. 

(d)  Issue  silver  certificates  of  denominations  of  $1,  $2  and  $5, 
in  exchange  for  silver  dollars  and  for  silver  certificates  in  de- 
nominations above  $5. 

(e)  Pay  out  gold  coin  in  exchange  for  silver  dollars. 

(/)  Pay  out  silver  dollars  in  exchange  for  gold  coin.  United 
States  notes  or  Treasury  notes. 

{g)  Pay  out  United  States  notes  or  Treasury  notes,  not  subject 
to  immediate  cancellation,  in  exchange  for  gold  coin. 

(h)  Pay  out  and  redeem  subsidiary  and  minor  coins  as  pro- 
vided by  existing  laws. 


35 

{i)  Pay  out  United  States  notes  in  exchange  for  currency 
certificates. 

14.  United  States  notes  or  Treasury  notes  once  redeemed  shall 
not  be  paid  out  again  except  for  gold  coin  unless  there  shall  be 
an  accumulation  of  such  notes  in  the  Division  of  Issue  and  Re- 
demption which  cannot  then  be  cancelled  under  the  provisions 
of  the  act,  in  which  case  the  Secretary  of  the  Treasury  shall 
have  authority,  if  in  his  judgment  that  course  is  necessary  for  the 
public  welfare,  to  invest  the  same  or  any  portion  thereof  in  bonds 
of  the  United  States  for  the  benefit  of  the  redemption  fund,  such 
bonds  to  be  held  in  the  Division  of  Issue  and  Iledemption,  sub- 
ject to  sale  at  the  discretion  of  the  Secretary  of  the  Treasury  for 
the  benefit  of  the  Division  of  Issue  and  Iledemption,  and  not 
for  any  other  purpose. 

15.  The  Secretary  of  the  Treasury  shall  be  authorized  to  sell 
from  time  to  time,  in  his  discretion,  any  silver  bullion  in  the 
Division  of  Issue  and  Redemption  ;  and  the  proceeds  in  gold 
of  such  sales  shall  be  placed  to  the  account  of  the  gold  reserve 
in  the  Division  of  Issue  and  Redemption. 

16.  The  gold  certificates  and  the  currency  certificates  shall, 
whenever  presented  and  paid  or  received  in  the  Treasury,  be  re- 
tired and  not  reissued. 

17.  No  United  States  note  or  Treasury  note  of  1890  of  a  de- 
nomination less  than  $10  shall  hereafter  be  issued ;  and  silver 
certificates  shall  hereafter  be  issued  or  paid  out  only  in  denomi- 
nations of  $1,  $2  and  $5  against  silver  dollars  held  by  or  de- 
posited in  the  Treasury. 

18.  The  Assistant  Treasurer  in  charge  of  the  Division  of 
Issue  and  Redemption  shall,  on  demand,  pay  in  gold  coin  all 
United  States  notes  and  Treasury  notes  presented  for  payment, 
and  as  paid  cancel  the  same  up  to  the  amount  of  $50,000,000. 
After  that  amount  shall  have  been  paid  and  cancelled,  he  shall 
then  from  time  to  time  cancel  such  further  amounts  of  notes  so 
paid  as  shall  equal,  but  not  exceed,  the  increase  of  national  bank 
notes  issued  subsequent  to  the  taking  effect  of  the  proposed  act. 

19.  If  at  the  end  of  five  years  next  after  the  taking  effect 
of  the  proposed  act  any  United  States  notes  or  Treasury  notes 


36 

shall  be  outstanding,  a  sura  not  exceeding  one  fifth  of  such  out- 
standing amount  shall  be  retired  and  cancelled  each  year  there- 
after; and  at  the  end  of  ten  years  after  the  passage  of  the 
proposed  act  the  United  States  notes  and  Treasury  notes  then 
outstanding  shall  cease  to  be  legal  tender  for  all  debts  public 
and  private,  except  for  dues  to  the  United  States. 

20.  The  Secretary  of  the  Treasury  may,  in  his  discretion, 
transfer  from  surplus  revenue  in  the  general  Treasury  to  the 
Division  of  Issue  and  Redemption  any  United  States  notes  or 
Treasury  notes  which  on  such  transfer  could  then  lawfully  be 
cancelled  under  the  provisions  of  the  proposed  act  if  they  had 
been  redeemed  on  presentation ;  and  when  so  transferred  the 
same  shall  be  cancelled.  The  Secretary  of  the  Treasury,  in  his 
discretion,  whenever  there  may  be  United  States  notes  or  Treas- 
ury notes  in  the  general  Treasury  which  are  not  available  as 
surplus  revenue,  and  which  upon  transfer  to  the  Division  of 
Issue  and  Redemption  could  then  lawfully  be  cancelled  under 
the  provisions  of  the  act,  may  exchange  such  notes  with  the 
Division  of  Issue  and  Redemption  for  gold  coin,  and  such  notes 
shall  thereupon  be  cancelled. 

21.  All  vested  rights  of  property  or  contract,  and  all  pen- 
alties incurred  before  the  tjjking  effect  of  the  proposed  act  or 
any  part  of  it,  shall  not  be  affected  by  the  passage  thereof;  and 
all  provisions  of  law  inconsistent  with  any  of  the  provisions 
<^f  the  proposed  act  should  be  repealed. 

II.  Banking  System. 

22.  The  total  issues  of  any  national  bank  shall  not  exceed  the 
amount  of  its  paid-up  and  unimpaired  capital,  exclusive  of  so 
much  thereof  as  is  invested  in  real  estate.  All  such  notes  shall 
be  of  uniform  design  and  quality,  and  shall  be  made  a  first  lien 
upon  all  the  assets  of  the  issuing  bank,  including  the  personal 
liability  of  its  stockholders.  No  such  notes  shall  be  of  less  de- 
nomination than  $10. 

23.  Up  to  an  amount  equal  to  25  per  cent,  of  the  capital  stock 
of  the  bank  (the  whole  of  its  capital  being  unimpaired),  the  notes 


37 

issued  by  it  shall  not  exceed  the  value  of  United  States  bonds,  to 
be  fixed  as  hereinafter  provided,  deposited  with  the  Treasurer 
of  the  United  States.  The  additional  notes  authorized  may  be 
issued  without  further  deposit  of  bonds. 

Beginning  five  years  after  the  passage  of  the  proposed  act,  the 
amount  of  bonds  required  to  be  deposited  before  issuing  notes 
in  excess  thereof  shall  be  reduced  each  year  by  one  fifth  of  the 
25  per  cent,  of  capital  herein  provided  for ;  and  thereafter  any 
bank  may  at  any  time  withdraw  any  bonds  deposited  in  excess 
of  the  requirements  hereof. 

24.  Every  national  bank  shall  pay  a  tax  at  the  rate  of  2  per 
cent,  per  annum,  payable  monthly,  upon  the  amount  of  its  notes 
outstanding  in  excess  of  60  per  cent,  and  not  in  excess  of  80  per 
cent,  of  its  capital,  and  a  tax  at  the  rate  of  6  per  cent,  per  an- 
num, payable  monthly,  upon  the  amount  of  its  notes  outstanding 
in  excess  of  80  per  cent,  of  its  capitaL 

25.  Any  bank  may  deposit  any  lawful  money  with  the  Treas- 
urer of  the  United  States  for  the  retirement  of  any  of  its  notes ; 
and  every  such  deposit  shall  be  treated  as  a  reduction  of  its  out- 
standing notes  to  that  extent ;  and  the  tax  above  provided  for 
shall  cease  as  of  the  first  of  the  following  month  on  an  equal 
amount  of  its  notes. 

26.  The  Secretary  of  the  Treasury  shall  annually  fix  the  value 
01  each  series  of  bonds  of  the  United  States  bearing  a  rate  of  in- 
terest exceeding  3  per  cent,  as  equalized  upon  the  rate  of  interest 
of  3  per  cent,  per  annum,  and  such  valuation  as  fixed  by  the 
Secretary  on  this  basis  shall  be  the  valuation  at  which  the  bonds 
will  be  receivable  upon  deposit.  Bonds  payable  at  the  option 
of  the  government  shall  be  receivable  at  95  per  cent,  of  their 
then  market  value  as  determined  by  the  Secretary  of  the  Treas- 
ury. If  any  bonds  shall  be  issued  hereafter  payable  at  a  date 
named  and  bearing  interest  at  3  per  cent.,  or  less,  they  shall  be 
receivable  at  par. 

27.  The  Comptroller  of  the  Currency  shall  from  time  to  time, 
as  called  for,  issue  to  any  bank  the  capital  of  which  is  full  paid 
and  unimpaired  any  of  the  notes  herein  elsewhere  provided  for, 
on  the  payment  to  the  Treasurer  of  the  United  States,  in  gold 


403176 


38 

coin,  of  5  jjer  cent,  of  the  amount  of  notes  thus  called  for,  which 
payments  shall  go  into  the  common  guaranty  fund,  for  the  prompt 
payment  of  the  notes  of  any  defaulted  national  bank.  Upon  the 
failure  of  any  bank  to  redeem  its  notes,  they  shall  be  paid  from 
the  said  guaranty  fund,  and  forthwith  proceedings  shall  be  taken 
to  collect  from  the  assets  of  the  bank  and  from  the  stockholders 
thereof,  if  necessary,  a  sum  sufficient  to  repay  to  said  guaranty 
fund  the  amount  thereof  that  shall  have  been  used  to  redeem 
said  notes  ;  and  also  such  further  sum  as  shall  be  adequate  to  the 
redemption  of  all  the  unpaid  notes  of  said  bank  outstanding. 

28.  Persons  who,  having  been  stockholders  of  the  bank,  have 
transferred  their  shares,  or  any  of  them,  to  others,  or  registered 
the  transfer  thereof  within  sixty  days  before  the  commencement 
of  the  suspension  of  payment  by  the  bank,  shall  be  liable  to  all 
calls  on  the  shares  held  or  subscribed  for  by  them,  as  if  they  held 
such  shares  at  the  time  of  suspension  of  payment,  saving  their 
recourse  against  those  by  whom  such  shares  were  then  actually 
held.  So  long  as  any  obligation  of  the  bank  shall  remain  unsat- 
isfied, the  liability  of  each  stockholder  shall  extend  to,  but  not 
exceed  in  the  whole,  an  amount  equal  to  the  par  of  his  stock. 

29.  If  the  said  guaranty  fund  of  5  per  cent,  of  all  the  notes 
outstanding  shall  become  impaired,  by  reason  of  payments  made 
to  redeem  said  notes  as  herein  provided,  the  Comptroller  of  the 
Currency  shall  make  an  assessment  upon  all  the  banks  in  pro- 
portion to  their  notes  then  outstanding  sufficient  to  make  said 
fund  equal  to  5  per  cent,  of  said  outstanding  notes. 

Any  bank  may  deposit  any  lawful  money  with  the  Treasurer 
of  the  United  States  for  the  retirement  of  any  of  its  notes ;  or 
return  its  own  notes  for  cancellation  ;  whereupon  the  Comptroller 
shall  direct  the  repayment  to  such  bank  of  whatever  sum  may 
be  the  unimpaired  portion  of  said  bank's  contribution  to  the 
guaranty  fund  on  account  of  said  notes. 

Any  portion  of  the  guaranty  fund  may  be  invested  in  United 
States  bonds  in  the  discretion  of  the  Secretary  of  the  Treasury. 

The  taxes  on  circulation,  provided  for  in  Paragraph  24,  as 
well  as  the  interest  accruing  from  investment  of  any  part  of  the 
guaranty  fund,  shall  be  held  in  the  Division  of  Issue  and  Redemp- 


39 

tion  in  gold  coin  or  in  United  States  bonds  in  the  discretion  of 
the  Secretary  of  the  Treasury,  and  shall  be  a  fund  supplementary 
and  in  addition  to  the  guaranty  fund,  to  be  used  only  in  case  said 
guaranty  fund  shall  ever  become  insufficient  to  redeem  any  bank 
notes  issued  hereunder,  and  it  shall  not  be  taken  into  account  in 
estimating  the  amount  of  assessments  necessary  to  replenish  said 
guaranty  fund  or  in  repayments  to  banks  of  their  contributions 
to  the  guaranty  fund, 

30.  The  present  system  of  national  bank  note  redemption 
should  be  continued,  with  a  constantly  maintained  redemption 
fund  of  5  per  cent,  in  gold  coin,  and  with  power  conferred  on 
the  Comptroller  of  the  Currency,  with  the  approval  of  the  Sec- 
retary of  the  Treasury,  to  establish  additional  redemption  agen- 
cies at  any  or  all  of  the  sub-treasuries  of  the  United  States,  as 
he  may  determine. 

31.  So  much  of  the  provisions  of  existing  law  as  require  each 
national  bank  to  receive  at  par,  in  payment  of  debts  to  it,  the  notes 
of  other  national  banks,  and  making  such  notes  receivable  at  par 
in  payment  of  all  dues  to  the  United  States  except  duties  on 
imports,  shall  be  extended  to  cover  notes  issued  under  the  pro- 
posed plan. 

32.  National  banks  shall  hold  reserves  in  lawful  money 
against  their  deposits  of  not  less  than  25  per  cent,  and  15  per 
cent,  for  the  respective  classes  as  now  provided  by  law,  at  least 
one  fourth  of  which  reserve  shall  be  in  coin,  and  held  in  the 
vaults  of  the  bank.  Neither  the  5  per  cent,  redemption 
fund,  nor  the  5  per  cent,  guaranty  fund,  shall  be  counted  as 
part  of  the  reserve  required.  No  bank  shall  count  or  report 
any  of  its  own  notes  as  a  part  of  its  cash  or  cash  assets  on  hand. 

33.  Permit  the  organization  of  national  banks  with  a  capital 
stock  of  $25,000,  in  places  of  four  thousand  population  or  less. 

34.  Provision  should  be  made  whereby  branch  banks  may  be 
established  with  the  consent  of  the  Comptroller  of  the  Currency 
and  approval  of  the  Secretary  of  the  Treasury. 

35.  For  the  purpose  of  meeting  the  expenses  of  the  Treasury 
in  connection  with  the  national  bank  system,  a  tax  of  one  eighth 
of  1  per  cent,  per  annum  upon  its  franchise,  as  measured  by  the 


40 

amount  of  its  capital,  surplus  and  untlivided  profits,  shall  be 
imposed  upon  each  bank. 

36.  So  amend  existing  laws  as  to  provide — 

(a)  For  more  frequent  and  thorough  examinations  of  banks. 

(6)  For  fixed  salaries  for  bank  examiners. 

(c)  To  provide  for  rotation  of  examiners. 

{d)  For  public  reports,  regular  or  special,  at  the  call  of  the 
Comptroller  of  the  Currency. 

(e)  To  make  it  penal  for  any  bank  to  loan  money,  or  grant 
any  gratuity,  to  an  examiner  of  that  bank,  and  penal  for  such 
examiner  to  receive  it. 

37.  Any  national  banking  association  heretofore  organized 
may  at  any  time  within  one  year  from  the  passage  of  the  pro- 
posed act,  and  with  the  approval  of  the  Comptroller  of  the  Cur- 
rency, be  granted,  as  herein  provided,  all  the  rights,  and  be 
subject  to  all  the  liabilities,  of  national  banking  associations 
organized  hereunder :  provided,  that  such  action  on  the  part  of 
such  associations  shall  be  authorized  by  the  consent  in  writing 
of  shareholders  owning  not  less  than  two  thirds  of  the  capital 
stock  of  the  association. 

38.  Any  national  banking  association  now  organized  which 
shall  not,  within  one  year  after  the  passage  of  the  proposed  act, 
become  a  national  banking  association  under  the  provisions  here- 
inbefore stated,  and  which  shall  not  place  in  the  hands  of  the 
Treasurer  of  the  United  States  the  sums  hereinbefore  provided, 
for  the  redemption  and  guarantee  of  its  circulating  notes,  or  which 
shall  fail  to  comply  with  any  other  provision  of  the  proposed 
act,  shall  be  dissolved;  but  such  dissolution  shall  not  take  away 
or  impair  any  remedy  against  such  corporation,  its  stockholders 
or  officers,  for  any  liability  or  penalty  which  shall  have  been 
previously  incurred. 

39.  Any  bank  or  banking  association  incorporated  by  special 
law  of  any  state,  or  organized  under  the  general  laws  of  any 
state,  and  having  a  paid-up  and  unimpaired  capital  sufficient  to 
entitle  it  to  become  a  national  banking  association  under  the  pro- 
visions of  the  proposed  act,  may,  by  the  consent  in  writing  of 
the  shareholders  owning  not  less  than  two  thirds  of  the  capital 


41 

stock  of  such  bank  or  banking  association,  and  with  the  approval 
of  the  Comptroller  of  the  Currency,  become  a  national  bank  un- 
der this  system,  under  its  former  name  or  by  any  name  approved 
by  the  Comptroller.  The  directors  thereof  may  continue  to 
be  the  directors  of  the  association  so  organized  until  others  are 
elected  or  appointed  in  accordance  with  the  provisions  of  the 
law.  When  the  Comptroller  of  the  Currency  has  given  to  such 
bank  or  banking  association  a  certificate  that  the  provisions  of 
this  act  have  been  complied  with,  such  bank  or  banking  associ- 
ation, and  all  its  stockholders,  officers  and  employes,  shall  have 
the  same  powers  and  privileges,  and  shall  be  subject  to  the  same 
duties,  liabilities  and  regulations,  in  all  respects,  as  shall  have 
been  prescribed  for  associations  originally  organized  as  national 
banking  associations  under  the  proposed  act. 


This  plan  is  based  in  its  main  features  upon  principles,  Avhich 
are  conceived  to  be  fundameutal  and  unchangeable,  and  which 
never  have  been,  and  never  can  be,  departed  from  without  dis- 
aster. Its  methods  and  details  are  of  course  capable  of  consider- 
able variation  consistently  with  these  principles.  The  methods 
suggested  have  been  reached  after  very  careful  inquiry  and 
study,  and  it  is  thought  that  they  will  prove  to  be  practical,  and 
adequate  to  the  realization  of  a  safe  and  steady  system  of  finance 


42 

and  currency,  in  which  all  the  people  of  our  country,  of  whatever 
calling  or  political  opinion,  are  equally  and  most  deeply  inter- 
ested. 

All  of  which  is  respectfully  submitted. 


Washington, 

December  17,  1897. 


Geoege  F.  Edmunds, 

Chairman. 

George  E,  Leighton, 

Vice-  Chairman. 

T.  G.  Bush. 

W.  B.  Dean. 

Charles  S.  Fairchild. 

Stuyvesant  Fish. 

J.  W.  Fries. 

C.  Stuart  Patterson. 

Robert  S.  Taylor. 


I  sign  except  as  to  provisions  relating  to  metallic  currency  and 
certificates  issued  thereon. 

Louis  A.  Garnett. 


The  undersigned,  while  heartily  agreeing  in  general  to  the 
above  plan,  dissents  from  the  principle  involved  in  Section  14, 
by  which  the  Secretary  of  the  Treasury  is  empowered  to  reissue 
United  States  notes  in  purchase  of  bonds.  Believing  that  the  in- 
crease of  the  circulation  should  not  be  left  to  the  decision  of 
government  officials ;  that  no  official  should  be  exposed  to  the 
pressure  which  would  thereby  be  created ;  that  the  issue  of  gold 
in  redemption  of  the  notes  would  prevent  contraction  ;  and  that 
it  is  inconsistent  with  the  principles  on  which  an  elastic  bank 
currency  has  been  recommended,  because  notes  should  not  be 
issued  by  the  government  in  an  emergency  when  bank  issues 
have  been  above  provided  for  exactly  such  an  occasion. 

J.  Laurence  Laughlin. 


Copies  of  this  report  can  he  had  upon  appli- 
cation to  the  Secretary  of  the  Monetary  Commission^ 
Room  30,  Corcoran  Building,  Washington,  or  to 
H.  H.  Hanna,  Secretary  of  the  Executive  Committee, 
Indianapolis. 


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